In the past few years, buying and selling NFTs has become widespread across the globe, including in Nigeria. Nigerian creators of unique real-world objects like art, music, and videos have made hundreds to thousands of dollars from monetizing their work as NFTs. Some other Nigerians buy NFTs as a means of hedging their funds against the continued devaluation of the naira. If you’re a creator or investor living in Nigeria and considering delving into the NFT ecosystem, you would want to know what the position of the law on NFT is first. Read on to learn what the position of the law on NFT in Nigeria is.
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Is NFT Legal in Nigeria?
Yes, NFT is legal in Nigeria. There are no laws or regulations that have been enacted in respect of NFT in Nigeria. There are, however, some legal considerations that may affect the operations of NFT in Nigeria, particularly in areas of intellectual property and data privacy.
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What is the Position of the Law in NFT in Nigeria?
There is currently no law in Nigeria that criminalizes, prohibits, or bans NFT in Nigeria. There are also no laws that ascribe punishment for buying or selling NFTs in Nigeria. According to Section 37 of the Constitution of the Federal Republic of Nigeria, no crime is committed if no written law says so. Therefore, NFT is legal in Nigeria.
There are, however, some laws that may affect the operation of NFTs in Nigeria. We’ll be highlighting those enacted laws and discussing how they relate to NFT. One such law is the Copyright Act, particularly Section 15 (1) (d) which focuses on intellectual property. Per the provisions of the aforementioned section of the Copyright Act, literary works, musical works, and artistic works, including NFTs, are eligible for copyright. What this implies is that creators may not produce or sell NFT that violates the intellectual property of another person or organization’s artistic/literary/musical work. Consequently, a creator of NFT may seek relief if an article violates their intellectual property rights in the NFT.
Another enacted law that could affect the operation of NFT in Nigeria is the Cybercrime (Prohibition, Prevention, etc) Act of 2015. Section 25 of the Cybercrime Act specifically prohibits intellectual property infringement on the Internet. As the marketplaces where NFTs are bought and sold are online, an author of digital works like NFTs is deemed to have a copyright per Section 25 of the Cybercrime Act. In like vein, an author of a digital work may be sued if they infringed on the copyright of another person’s work, without the due authorization of the owner of the copyright.
According to both laws already referenced above, that is, the Copyright Act and Cybercrime Act, Nigerian sellers and creation of NFTs must only sell NFTs for which they have the intellectual property right. Selling a copy of an already existing artwork as NFT is a contravention of these laws, making the digital creator or seller liable for copyright infringement. And, if found guilty, several penalties exist for infringement of intellectual property rights in Nigeria.
The next statutory authority that might affect NFTs in Nigeria is the Securities and Exchange Commission (SEC). Armed with the oversight responsibility of regulating securities and investments in Nigeria, the SEC circulars on digital currencies suggest that virtual assets like NFTs are subject to the regulation of the SEC. For the NFT transaction to fall under the regulatory oversight of the SEC, it must have been committed within Nigeria, or when a foreign digital author targets to sell NFT to a Nigerian investor living in Nigeria.
The Central Bank of Nigeria has, in recent years, criticised virtual assets like cryptocurrencies due to their decentralised nature of the cryptocurrency ecosystem. A CBN circular dated February 5, 2021, gave directives to commercial banks and other financial institutions to avoid dealing with entities dealing in cryptocurrencies. Although NFTs aren’t expressly indicated in the circular, they are traded through blockchain technology such as Ethereum. This creates uncertainty about what the position of CBN is on NFT. However, trading NFT on peer-to-peer platforms like Binance and Coinbase is a way to dodge CBN’s imposed regulation on financial bodies to avoid crypto-related transactions.
We must point out that nowhere has circulars released by parastatals like CBN and SEC been equated to an enacted law. That means until the statements in such circulars are contained in a written law, it might be hard to prove a person guilty if he goes against the rules of such circulars.
Although no enacted law at this time expressly provides guidelines for regulating NFT transactions in Nigeria, there is a Bill in the works that address digital assets like NFT. That Bill is the Finance Bill of 2021 that proposes the guidelines for the taxation of digital assets. At this time, however, President Buhari is yet to append his signature to pass the Bill into law.
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Guidelines on How to Trade NFT in Nigeria
We’ve been able to establish the legality of NFT in Nigeria because no written law expressly prohibits its sale or purchase in the country. However, sellers and creators of NFTs in Nigeria must be aware of the existing laws on copyright and intellectual property rights. To that end, digital authors of NFTs in Nigeria must only sell digital assets for which they have intellectual property rights.
In addition to adhering to the copyright guidelines, buyers and sellers of NFTs should remember to carry out NFT transactions on peer-to-peer platforms like OpenSea, Binance, and Coinbase. Any transaction on these platforms isn’t connected to Nigerian financial institutions, thereby sidestepping CBN’s regulations concerning digital currencies since NFTs are tokenized on the blockchain.
Conclusively, we should point out that NFTs are volatile. So, whether you are a seller on an investor in NFT, it is important to always put this in mind.
We believe this article was able to clearly explain the position of the law on NFT in Nigeria. And that position is that NFT is legal in Nigeria.